“Hong Kong’s status as a leading international financial centre has grown with increased participation by international and mainland [Chinese] investors,” the HKEX consultation paper said.
“There is a pressing need to consider a change to existing severe weather arrangements in Hong Kong to enhance Hong Kong’s competitiveness as a trading and risk-management venue and international financial centre.”
HKEX CEO struggles to understand why trading halts during bad weather
HKEX CEO struggles to understand why trading halts during bad weather
The new proposals reflect “HKEX’s commitment to supporting the continued resilience and attractiveness of Hong Kong as one of the world’s premier financial centres, offering a broad and diverse suite of products and platforms to investors all over the world”, Nicolas Aguzin, the bourse operator’s CEO, said.
“Of course, personnel safety remains a key consideration in our proposal – and we encourage market participants to work remotely where possible during severe weather events.”
Aguzin raised the shutdown issue soon after taking over as CEO in May 2021, and Financial Secretary Paul Chan Mo-po has also lent his support for changing the status quo.
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HKEX CEO Nicolas Aguzin on the future of Hong Kong’s capital market
HKEX CEO Nicolas Aguzin on the future of Hong Kong’s capital market
The city’s stock markets began to close in the 1950s when the Typhoon signal No. 3 was raised. This was changed to Typhoon signal No. 8 in the 1960s, according to former stockbroker Cheung Tin Sang, who entered the industry in 1958 and worked as a broker for over 63 years before retirement.
The move will enhance the city as an international financial centre. Hong Kong is the odd one out among its peers – it continues to halt stock and derivatives trading during inclement weather despite scrapping a physical trading hall and going fully electronic in 2017.
The HKEX consultation paper said since trading has become fully electronic, market trading could continue even if physical bank branches and brokerages closed during a typhoon or heavy rainstorms. The banking system will help provide electronic money transfers and e-cheque clearances, while HKEX will enhance its infrastructure to allow remote access of trading and clearing.
HKMA looking into how banks can help stock market function during bad weather
HKMA looking into how banks can help stock market function during bad weather
“Hong Kong remains the only major financial market worldwide to close during typhoons and severe rainstorms,” said Katerine Kou, chair of the Hong Kong Securities Association and CEO of local brokerage Victory Securities. “This is something we need to catch up with the international practices.”
Keeping trading active could incrementally aid HKEX’s bottom line. Average daily turnover of stocks fell 12 per cent in the first nine months of this year to HK$109.7 billion (US$14 billion) from the same period a year earlier, according to its latest report to shareholders.
Higher turnovers could also mitigate an expected drop in tax collections from stamp duties on stock transactions. The government on November 17 cut the duty payable by buyers and sellers to 0.1 per cent from 0.13 per cent, a decision that could shave HK$14.1 billion per year from the city’s coffers.
03:02
Typhoon Koinu brushes past city, leaving trail of damage
Typhoon Koinu brushes past city, leaving trail of damage
HKEX will collect views from the market through January 26 and see if it can gain consensus and overcome potential technical hurdles.
One issue relates to the fact that all of the city’s 1,100-odd bank branches are also typically closed for similar weather events, potentially delaying cheque processing and settlement deadlines.
Hong Kong must be more proactive as IPO proceeds hit 20-year low, report says
Hong Kong must be more proactive as IPO proceeds hit 20-year low, report says
“The HKMA agrees that the proposal, if implemented, will allow both local and overseas investors to continue securities trading under inclement weather, and will help enhance the competitiveness of Hong Kong as an international financial centre,” a spokesman for the de facto central bank said on Thursday.
“System changes may be required to implement the proposal. Therefore, notwithstanding that the public consultation is still ongoing, the HKMA would encourage banks to commence the planning and preparation work as early as possible, so as to shorten the lead time for the introduction of severe weather trading.”